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Tesco 'deliberately delayed payments to suppliers to improve finances'

Published 26/01/2016

A report on Tesco's practices revealed the supermarket giant 'intentionally delayed' paying suppliers
A report on Tesco's practices revealed the supermarket giant 'intentionally delayed' paying suppliers

Tesco repeatedly and deliberately delayed payments to suppliers in a widespread practice designed to improve its financial position, an investigation has found.

Groceries Code Adjudicator (GCA) Christine Tacon said she was most shocked at the discovery of how widespread the supermarket giant's actions were, saying that "practically every supplier I spoke to had evidence of delays in payments."

However, the report was met with silence from the suppliers themselves, with representatives claiming it was still "a brave business" that was prepared to talk about their difficulties with Tesco.

Ms Tacon's long-awaited 84-page report found Tesco "seriously" breached an industry code by intentionally delaying payments to suppliers and made unilateral deductions.

She made a series of recommendations to stop the practices, saying the retailer should be more transparent in its dealings with suppliers, but could not impose a financial penalty because this power was only given to her after she launched her investigation.

She said: "I found that Tesco knowingly delayed paying money to suppliers in order to improve its own financial position.

"The length of delays, their widespread nature and the range of Tesco's unreasonable practices and behaviours towards suppliers concerned me."

A four-week deadline has been set for Tesco to say how it plans to implement the recommendations.

Tesco group chief executive Dave Lewis apologised and said he accepted the GCA's findings.

He said: "In 2014 we undertook our own review into certain historic practices, which were both unsustainable and harmful to our suppliers. We shared these practices with the Adjudicator, and publicly apologised. Today, I would like to apologise again. We are sorry.

"Over the last year we have worked hard to make Tesco a very different company from the one described in the GCA report. The absolute focus on operating margin had damaging consequences for the business and our relationship with suppliers. This has now been fundamentally changed."

A Federation of Small Businesses spokesman said the organisation had received many requests to speak to suppliers involved but had been unable to find anyone prepared to talk.

He said: "We have been unable to find a business prepared to speak out on this. It's a brave business that is prepared to come forward and speak out on the issue of late payments."

Duncan Swift, partner and head of the food advisory group at accountancy firm Moore Stephens, said the GCA's report "at last makes a statement that doesn't pull its punches to say that Tesco's behaviour was unreasonable".

But he said: "Does it go any further than that? No. Can suppliers expect any redress? No.

"Also, the review only covers the second half of Tesco's mis-statement period and is silent on the probability that these bad behaviours went on much earlier."

Mr Swift added: "If a supplier was to raise these sorts of difficulties in the form of legal action seeking redress, that would be seen as hostile by the supermarket and the relationship would be ended.

"And this could be seen as the case by other supermarket buyers too. It's a small world."

The GCA's report is separate to the ongoing Serious Fraud Office investigation into a £326 million accounting black hole at the supermarket.

The SFO launched a probe in October 2014 after the discovery of a £263 million hole in profit expectations at Britain's biggest supermarket. It was later found to be £63 million bigger than this.

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